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Ball Corp (BLL) Up 20% YTD: What's Working in Its Favor?

Zacks Equity Research

Shares of Ball Corporation BLL have outperformed the S&P 500 on a year-to-date basis, aided by continued strong demand for aluminum packaging and focus on new products. The stock has gained 20.2% compared with the S&P 500’s growth of 11.4%.

Ball Corporation, a Zacks Rank #3 (Hold) stock, has a market cap of roughly $18.74 billion. The company has expected long-term earnings per share growth of 5.5%.
Let’s delve deeper and analyze the reasons behind the company’s impressive price performance and find out if there is room for further appreciation:

Strong Outlook: Ball Corporation’s comparable EBITDA guidance for 2019 is at $2 billion and it expects free cash flow of more than $1 billion in 2019. This is backed by continued strong demand for aluminum packaging and robust aerospace backlog. In the year, the company expects to surpass long-term target of 10% to 15% earnings per share growth. It expects capital spending of $600 million. Ball Corporation continues to work on achieving better value for standard products and higher growth for specialty products. The company focuses on pursuing cost-cut programs, completing growth capital projects and commercializing on the inherent sustainability attributes of metal packaging.

Healthy Growth Projections: For fiscal 2019, the Zacks Consensus Estimate for earnings per share is at $2.61, projecting year-over-year growth of 18.6% while the same for 2020 shows a rise of 13.8% to $2.97.

Growth Drivers: Ball Corporation primarily focuses on expanding its geographic footprint, aligning with the right customers and markets, growing with new products and capabilities, and leveraging its technical knowhow. In sync with this, the company commenced production at all four new facilities of its specialty beverage-can manufacturing facility in Goodyear during the fourth quarter. To support growth for beverage cans in the Iberian Peninsula, the company constructed a two-line, aluminum beverage can manufacturing facility near Madrid, Spain, with a majority of the facility’s capacity secured under a long-term customer contract. The facility began initial commercial production on one line in July 2018 and will produce multiple can sizes once it is fully operational. The company intends to invest in its beverage container plant in Nogara, Italy.
The company expects to benefit from outstanding requests for bids and proposals, and contracts wins. The company is also on track to realize synergies from the Rexam acquisition, which was concluded in June 2016. Moreover, the company’s aerospace business is poised to see earnings growth of 15% in 2019. With contracted backlog levels at a record $2.2 billion and won-not-booked backlog at $4.7 billion, the future looks brighter for aerospace over the next three to five years.
Ball Corporation continues to execute its long-term strategy of growing earnings through increasing revenues above cost growth by focusing on value over volume strategy in standard containers, driving more mix shift to specialty containers. It is also focused on developing innovative aluminum packaging products and expanding business with strong cash flow and EVA returns. Moreover, the company is taking planned cost initiatives, which will boost earnings and aid margin expansion in 2019. 

Ball Corporation Price and Consensus


Ball Corporation Price and Consensus | Ball Corporation Quote

Stocks to Consider

A few better-ranked stocks in the Industrial Products sector are Mueller Industries, Inc. MLI, Alarm.com Holdings, Inc. ALRM and Albany International Corp. AIN, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Mueller Industries has an expected earnings growth rate of 2.2% for 2019.
Alarm.com has an expected earnings growth rate of 7.8% for the current year.
Albany International has an expected earnings growth rate of 44.7% for 2019.

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